- The European Union and China have begun early discussions to cancel the current additional tariff against Chinese-made EVs entering the European Union, instead exploring a system where a minimum price for EVs made in China would instead be set, according to Reuters.
- The move comes in the midst of a Trump-led trade war, with total tariffs against most Chinese imports into the U.S. now standing at a harsh 145%.
- Could this move put Chinese EV manufacturers in a stronger position when it comes to European expansion?
In midst of Trump trade war, China looks to renegotiate with the EU on EVs
In October last year, the European Union voted in favour of imposing additional tariffs against EVs made in China – applying not just to Chinese brands, but other brands who were producing EVs within China (such as Tesla). Depending on the manufacturer, these rates have been as high as 45%, increasing the difficulty of European expansion for Chinese OEMs – with non-EU members such as the UK picking up the demand slack.
European OEMs that already sell a significant number of cars and EVs into China, such as Volkswagen Group, had previously spoke out against the implementation of these import tariffs, likely with a concern that China would retaliate in ways that would hurt its own business in China. On the back of those tariffs, China had also already encouraged its local automakers to ‘avoid’ setting up production sites in EU countries that had supported the tariffs. This potential change of policy from the EU could mean China changes its mind in this aspect, too.
Now, with U.S President Trump imposing a blanket 25% tariff against all foreign automakers, European ones included, selling cars into the U.S. will prove harder in the times to come. European OEMs may plan to sell more into China to fill this deficit, hence why these seemingly softer import rules against Chinese-made EVs are being considered.
In reaction to Trump’s tariffs, President of the German Association of the Automotive Industry, Hildegard Müller, commented, highlighting the need to renegotiate trade worldwide:
“The current situation also provides a basis for fundamentally necessary actions for the EU. For example, the speed and determination in concluding free trade agreements must be massively increased. Concrete results must be achieved with as many regions around the world as possible. The EU must now be an advocate for free and fair global trade. Germany’s and Europe’s economies need strong alliances and resilient networks.”
Even if this minimum pricing rule for Chinese EVs is adopted, this will still enable European OEMs to more easily compete on price against budget Chinese OEMs with lower production costs, and comes as Volkswagen lines up the launch of its most affordable EV yet: the ID. EVERY1. The exact details of how such a minimum pricing rule would work, which has traditionally only applied to set-price commodities such as fruit and vegetables, remains to be seen.
